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United States Court of Appeals,
Fifth Circuit.
No. 912837.
Wilmar Eugene ALLEN, PlaintiffAppellant,
v.
U.S. GOVERNMENT DEPARTMENT OF TREASURY and COMMISSIONER OF
INTERNAL REVENUE, DefendantsAppellees.
Nov. 10, 1992.
Appeal from the United States District Court For the Southern District of Texas.
Before POLITZ, Chief Judge, SMITH and BARKSDALE, Circuit Judges.
POLITZ, Chief Judge:
In this taxpayer refund action, Wilmar Eugene Allen appeals an adverse summary judgment
which holds that "tokes"--gratuities given by casino gamblers to dealers--are, like tips,
compensation under the Internal Revenue Code but are not gain from wagering transactions. We
affirm.
Background
The record reflects no factual disputes of consequence. During the years 1985 and 1986 Allen
worked as a blackjack dealer at the Imperial Palace Casino in Las Vegas, Nevada. The Internal
Revenue Service selected for audit his tax returns for those years. Allen could not substantiate
gambling losses and the audit uncovered unreported income from tokes which were received in the
course of his employment at the Imperial Palace.
Casino dealers traditionally receive tokes from patrons playing at their tables. Tokes take the
form of bets placed by the patron for the dealer's benefit.1 Dealers typically pool and split the tokes
received on each shift. Tokes differ from gratuities which are given in most other situations because
a casino dealer, unlike a waiter, bellhop, or other service employee, cannot provide "improved"
service in hopes of receiving more or better gratuities. Indeed, casino policy prudently prohibits
1Tokes also may take the form of chips given directly to the dealer. In this opinion we discuss
only the wagering toke.

dealers from performing favors of any kind for any patron, regardless of gratuities given or expected.
Upon the completion of its audit the IRS gave Allen a statutory deficiency notice. Allen opted
against challenging the deficiency notice before the Tax Court under 26 U.S.C. § 6213(a). The IRS
then assessed and Allen paid additional tax due, interest, and penalties.2 This refund suit followed.3
The trial court, adopting the recommendations of a magistrate judge, granted summary judgment and
Allen timely appealed.
Analysis
We review de novo the district court's grant of summary judgment.4 Allen vigorously urges
that his toke income constituted gain from wagering transactions under the Code, and that 26 U.S.C.
§ 165(d) permits him to set off his gambling losses against that gain.5 The government rejoins that
toke income constitutes compensation for services against which 26 U.S.C. § 165(d) permits no
deduction for gambling losses. In the resolution of this issue we are aided by the Ninth Circuit's
opinion in Olk v. United States6 and a body of relevant Tax Court opinions.
In Olk, our colleagues considered a taxpayer's claim that tokes constitute gifts from the casino
patron to the dealer and, as such, are excluded from gross income by 26 U.S.C. § 102(a).7 Holding
that tokes constitute compensation for services, the Olk court observed that
receipt s by taxpayers engaged in rendering services contributed by those with whom the
taxpayers have some personal or functional contact in the course of the performance of the
services are taxable income when in conformity with the practices of the area and easily
valued. Tokes, like tips, meet these conditions.8
2Allen paid the IRS $22,280.04 and $15,526.02 for 1985 and 1986, respectively.
3Allen also asserted several other claims on which the trial court granted adverse summary
judgment. These have not been appealed.
4See Perry v. Mercedes Benz of North America, Inc., 957 F.2d 1257 (5th Cir.1992);
Fed.R.Civ.P. 56(c).
5Section 165(d) provides that "[l]osses from wagering transactions shall be allowed [as a
deduction] only to the extent of the gains from such transactions."
6536 F.2d 876 (9th Cir.), cert. denied, 429 U.S. 920, 97 S.Ct. 317, 50 L.Ed.2d 287 (1976).
7Allen challenges only the denial of his deduction for losses from wagering transactions.
8Olk, 536 F.2d at 879.

We find this reasoning, consistent with Tax Court precedents,9 highly persuasive and we now hold
that wagering tokes constitute compensation for services rendered by casino dealers.
Allen's contention that toke income constitutes gain from wagering transactions for the
purposes of 26 U.S.C. § 165(d) fails to persuade; however, as neither the Code nor Treasury
Regulations define the term "wagering transaction," we accord those words their ordinary meaning.10
The nature of tokes persuades that they cannot constitute wagering transactions for the dealer. As
Allen admitted at a hearing on the cross-motions for summary judgment, the dealer receiving a toke
cannot elect to take the amount wagered on his behalf by the patron in lieu of the proceeds (if any)
of that wager. The dealer has no part in deciding to make the wager, and stands to lose nothing by
it. We therefore conclude that the dealer receiving a toke has not entered into a wagering transaction
as contemplated by 26 U.S.C. § 165(d).11
Allen finally suggests that application of the Code to toke income in the manner proposed
by the government would fail to accord equal protection of the laws to casino dealers.12 We are
aware of no authority for the proposition that casino dealers constitute a suspect class, and because
we cannot agree that the Internal Revenue Code irrationally fails to characterize toke income as "gain
9See, e.g., Catalano v. Commissioner, 81 T.C. 8 (1983), aff'd sub nom. Knoll v.
Commissioner, 735 F.2d 1370 (9th Cir.1984); Bevers v. Commissioner, 26 T.C. 1218 (1956).
10Boyd v. United States, 762 F.2d 1369 (9th Cir.1985).
11Our holding today accords with a long line of Tax Court decisions. See, e.g., Catalano;
Florence v. Commissioner, 42 T.C.M. (CCH) 119 (1981); Williams v. Commissioner, 41 T.C.M.
(CCH) 312 (1980); Bevers. See also Boyd, 762 F.2d at 137374 (where casino employee's share
of fees collected from patrons was not gain from wagers entered into by employee or casino,
those funds are not "gain from wagering" within the meaning of section 165(d)).
Allen suggests that false premises in the above-cited Tax Court opinions taint
them. He claims that these opinions erroneously assume that the casinos merely acquiesce
in, rather than actively encourage, the giving of tokes; that dealers may not gamble at
their own tables; and that tokes are analogous to tips. He further urges, contrary to Tax
Court rulings, that tokes cannot constitute payment incident to services rendered by
dealers, because casino rules prohibit dealers from performing special services for patrons.
We find these arguments unpersuasive.
12Allen raises his equal protection claim under the fourteenth amendment. As that amendment
has no application to the federal government, we treat this claim under the equal protection
component of the fifth amendment.

from wagering transactions," we must reject Allen's equal protection claim.13
AFFIRMED.

13See Regan v. Taxation With Representation, 461 U.S. 540, 54751, 103 S.Ct. 1997,
200104, 76 L.Ed.2d 129, 137140 (1983) (under equal protection component of fifth
amendment, tax statute not employing suspect classification subject only to "rational basis"
review).